QUARTERLY REPORT
For March 31, 2008

ERECT FUND I / DEBT APPROVES LOAN MODIFICATIONS FOR TOWER AT HIGHLANDS OFFICE BUILDING WARRENSVILLE HEIGHTS, OH

On January 30, 2008, ERECT Fund I / Debt approved several modifications to its first mortgage loan on the Tower at Highlands, a four-story office building with 76,036 rentable SF situated in the Highlands Business Park in Warrensville Heights, Ohio that is 100% leased. The modifications included: a $1,000,000 loan increase to reimburse the borrower for tenant improvement costs based on an updated appraisal, bringing the loan balance to $9,914,739 (75% of appraised value); a consolidation of the existing dual note structure; an increase in the effective interest rate from 6.0% to 6.5%; elimination of revenue participation payments; an increase in the amortization schedule from 25 to 28 years; and a pre-approval of a security release of excess land (1.3 acres) for new office development subject to an updated appraisal and ongoing union labor participation in the development of the excess land. The borrower is also discussing additional investment opportunities in the Cleveland area with the ERECT Fund. Documentation and funding for the modification was completed on February 29, 2008.

ERECT FUND I / DEBT – PROJECT UPDATES

CLEVELAND BUSINESS PARK, CLEVELAND, OH – The ERECT Fund has first mortgage loans on three flex/warehouse buildings located on Cleveland Parkway near Cleveland Hopkins International Airport off of Interstate 480. Building One, (56,854 SF) building is 99% leased to Schindler Elevator (26,700 SF), National City Bank (15,838 SF) Hatch Mott McDonald (7,280 SF), and Alphaport (6,498 SF). Building Two (87,160 SF) is 65% leased to Office Max/Boise Cascade (56,460 SF) and Building Three (42,150 SF) is 100% leased to EGL Eagle Global Logistics LP. This lease expires April 30, 2008 and a lease extension is being negotiated. EGL provides ground and air freight forwarding service offering local pick-up and delivery, truck brokerage services and various value-added logistics services. Debt service payments are current.

HARBOR GARDENS PARK OFFICE BUILDING, PITTSBURGH, PA – ERECT Fund I / Debt has a first mortgage loan on this four-story, 63,000 rentable SF office building on Metropolitan Street located on the north side of Pittsburgh. Its location and building characteristics are competitive with Class B downtown and fringe office buildings, though its rentals rates are somewhat lower. Harbor Gardens is effectively 100% lease. Tenants include Bidwell Training Center, Manchester Craftsman’s Guild, Citizens Bank and UPMC Health Systems. Built in 2000, the property remains in good condition and debt service payments are current.

NORTH SHORE OPTION AREA GARAGE, PITTSBURGH, PA – This 10-level parking garage with 1,321 spaces on the North Shore of Pittsburgh was completed in June 2006. Construction of the Port Authority Light Rail Transit System extension to the North Shore is underway near the site, and will feature a passenger station at the garage when completed in 2010, The garage remains open during this construction. Bulk space leases have been signed with area businesses such as Allegheny General Hospital, Fox Sports Net, Cisco Systems, Grille 36 and Hyde Park; however, the garage has not met its operating goals as development of other building on the North Shore has not occurred as quickly as originally anticipated. Construction loan proceeds that were not used from ERECT Fund and Strategic Investment Fund (second mortgage lender) in the amount of  $706,742 are being added to an already established Debt Service Reserve that is available for the borrower to draw upon to cover first and second mortgage debt services payments in the event of a shortfall in operating income.

ERECT FUND II / EQUITY – PROJECT UPDATES

BRIDGESIDE POINT II, PITTSBURGH, PA – ERECT Fund II / Equity is a limited partner in BPA II, Ltd. With a $6,150,000 investment in this five story office and bio-technology research building being constructed on 1.7 acres in the Pittsburgh Technology Center off Second Avenue in the City of Pittsburgh (Hazelwood section). Bridgeside Point II will have approximately 150,000 rentable square feet, of which two-thirds is planned to be developed as wet-lab research for biotechnology research, and one-third as Class A office space, subject to leasing requirements. Deep foundations are completed while structural steel and concrete work continue along with excavation and utility work. The overall project is approximately 22% completed. The contractor reports that completion of the building core and shell is expected to occur in December 2008.

IMPERIAL BUSINESS PARK, NORTH FAYETTE TOWNSHIP, PA. ERECT has decided to adjust the market value of Imperial Business Park L.P. (the “Partnership”) to zero effective March 31, 2008 in accordance with NCREIF standards and generally accepted accounting principles. The reason for these adjustments is that the current market value of Partnership is less that the outstanding secured and unsecured liabilities of the Partnership. The Partnership’s current market value has been impaired by a number of issues related to the management and cost controls of the general partner that have affected its ability to operate as a going concern. While we are disappointed with these results, we believe that write-down in the value of the investments in the partnership is a one-time event, and that it is in the best interests of our investors that we made this adjustment effective March 31, 2008. ERECT Fund II and ERECT Co-Participation Fund have separate investments in Imperial Business Park Phase II (IBP II,LLC) that are not affected by this action. 

KANAWHA MALL, CHARLESTON, WV – On July 20, 2007, ERECT Fund II / Equity entered into a limited partnership known as KM Associates LLC with an investment of $4,533,000 for the acquisition, renovation and expansion of the Kanawha Mall. The existing enclosed mall with approximately 196,000 SF located on approximately 18 acres on MacCorkle Avenue SE in Charleston, WV, is being redeveloped as a community shopping center with approximately 256,556 SF to be known as “The Shops at Kanawha”. The total estimated cost of the acquisition and redevelopment is $23,642,420. The first phase of construction is underway with partial demolition of the front façade, interior demolition, helical pier testing and installation, and utility relocations.

TURNPIKE DISTRIBUTION CENTER, BIG BEAVER BORO, PA – Construction on the building shell is complete on the 410,000 SF bulk warehouse and distribution facility located at the interchange of I-76 (Pa Turnpike) and State Routes 60 and 351. Prospective tenants have been touring the property. ERECT Fund II / Equity is a limited partner in Turnpike Distribution LP and has a $3 million investment